The automaker will shift production of more vehicles destined for Canada from Indiana to Japan
Trade disputes can often have unforeseen negative consequences for the initiating parties, and the latest tariff conflict between the United States and Canada is already causing significant shifts in the automotive industry landscape. The impact is immediate, forcing Subaru into complex logistical maneuvers to manage costs effectively.
In 2024, Subaru sold 68,043 vehicles in Canada, with 26 percent, or 17,700 units, originating from the United States. However, due to a new round of tariffs imposed by Canada in response to actions by the Trump administration, vehicles built south of the border now face a 25 percent tax. Consequently, Subaru is relocating production of its Canadian-bound models out of the US to mitigate these increased costs, a move that is projected to negatively impact the American economy.
By the 2026 model year, Subaru anticipates that only 10 percent of its vehicles destined for the Canadian market will be produced in the US. Tomohiro Kubota, CEO of Subaru Canada, stated to Autonews Canada that this shift aims to “minimize the impact of the counter surtax.” While production of the Outback for Canada will continue in Lafayette, Indiana, for the time being, it is slated to move to Japan in the near future.
Upon the relocation of Outback production, the Indiana plant will be retooled to commence building the Forester, Subaru’s second most popular model in Canada after the Outback. It remains uncertain whether these Indiana-built Foresters will be exported to Canada or if Subaru will instead rely on its existing production facilities in Japan, which already manufacture the Forester for various global markets.
It is noteworthy that Subaru is among the few established automakers without any production facilities within Canada. Historically, the company has relied on the USMCA agreement, which was renegotiated during Donald Trump’s first term in office. With the effectiveness of this agreement now diminished by the new tariffs, Subaru is adapting its operational strategy.
Subaru is not alone in seeking innovative solutions to circumvent tariffs. Canada as a whole is considering easing its regulations to facilitate increased vehicle imports from countries other than the United States. Volvo has already laid off hundreds of workers in the US, and other automakers are halting imports into the nation.
The ultimate outcome of this situation remains uncertain. However, it is clear that the automotive industry is poised for significant changes, and these changes may not necessarily lead to improvements.
